Luminar: Lazr-focused on guidance
Nov-2021
The Story
In this valuation, I imagine a world where self-driving cars took off and Luminar managed to meet both of their revenues and EBITDA guidance before reducing their growths to be closer to the the mature Semiconductor industry. Mature Semiconductor industry was selected as the stable growth targets for operating margin and sales/capital due to being a closer target for the operating margins and similar value proposition (value proposition in both hardware and software). Auto Parts was chosen as the industry beta for the cost of capital calculation since that is the business Luminar is in.
The Assumptions
Base year Years 1-4 Years 5-10 After year 10 Link to story
Revenues 14.31%➡142.96% 84.86%➡5.52% 1.55% Grows according to the guidance but -10% in 2030 to account for the narrative change due to semiconductor crisis. Risk-free rate for the terminal year.
Operating margin (343.12%) (318.62%)➡32.61% 38.80%➡19.89% 18.00% Grows according to the guidance up to 2025, then falls back to 3rd quartile of mature Semiconductors firms in stable growth.
Tax rate 27.00% 27.00% 27.00% 27.00% Marginal tax rate according to 2021 KPMG data.
Reinvestment Sales/Capital = 1.03 ➡ 0.71 44.22% Median sales/capital of all Semiconductors firms to the median of mature Semiconductors firms.
Cost of Capital 2.57%➡2.88% 2.98%➡3.51% 3.61% Moving towards Auto Parts industry average
The Cash Flows
Revenues Operating Margin EBIT EBIT (1-t) Reinvestment FCFF Implied ROIC
Base year (2021) $26 (343.12%) ($87) ($87) (225.67%)
1 (2022) $29 (318.62%) ($93) ($93) $4 ($97) (220.54%)
2 (2023) $59 (165.24%) ($98) ($98) $30 ($129) (135.27%)
3 (2024) $250 (14.55%) ($36) ($36) $199 ($235) (13.41%)
4 (2025) $608 32.61% $198 $198 $387 ($189) 30.08%
5 (2026) $1,123 38.80% $436 $411 $581 ($170) 33.18%
6 (2027) $1,868 35.02% $654 $478 $874 ($396) 22.60%
7 (2028) $2,841 31.24% $888 $648 $1,192 ($544) 19.60%
8 (2029) $3,759 27.46% $1,032 $753 $1,175 ($422) 16.82%
9 (2030) $4,338 23.67% $1,027 $750 $776 ($27) 14.26%
10 (2031) $4,577 19.89% $910 $665 $337 $327 11.88%
Terminal year $4,648 18.00% $837 $611 $270 $341 3.51%
The Value
Terminal cash flow $341
Terminal cost of capital 3.61%
Terminal value $16,542
PV (Terminal Value) $12,267
PV (CF over next 10 years) ($1,645)
Sum of PV $10,622
- Adjustment for distress $956 Probability of failure: 10.00%
- Debt & Minority Interests $0 Based on Ba1 rating from Moody's
+ Cash & Other Non-operating assets $581
Value of equity $10,247
- Value of equity options $352
Number of shares 342.21 million
Value per share $25.01 Stock was trading at $17.59
In millions USD except Value-per-share.